Oh my goodness, I found a good value stock

T

thehangingman

I have been working hard to try to make you some mad money. Whoops. Sorry, I've been watching CNBC too much....

I've been doing some research and found the only value plays in the market right now. Its the trucking sector. Now let me splain...

The 2001 recession was from March 2001 until November 2001.

January 16, 2001- Arkansas Best Corp (ABFS) closed at $20.56 with a P/E of 8.4

April 4th, 2001- 14.08 w/PE 5.8

September 3, 2001- 22.97 w/PE 10

After that the stock crashed, but that was because of 9/11.

Compared with YRCW

Jan 30th, 2001 20.37 w/PE 8.4

March 21, 2001- 14.7 w/PE 6.2

Sep 3, 2001- 22.97 w/PE 10.5

So the trucking stocks are a buy right now. They were at their bottom at the start of the recession and top out near the end.

I did notice one thing in regards to the P/Es when charting the trucking stocks over a 10 year period. When the nation's economy is expanding, the P/Es of the trucking stocks seem to expand wildly. I saw the P/Es go as high as 45+ when the economy was expanding. The P/Es actually went up past 140+ in the late 90s. Then they went up past 40+ in late 2004.

I also noticed that the highest P/Es were in 1997-1998 and then started contracting from there. When the tech market was in full crash mode, the P/Es of the truck stocks started expanding once again.

Looking at the charts, I believe the truckers know the real deal and can spot the economy contracting before anyone else. In the 90s, the economy was at its height around 1998 and then started its downhill descent from there without anyone noticing. In similiar fashion, the economy was at a high in 2005 and then started its slow descent from there.

This makes perfect sense because trucks transport goods. When people stop buying products there is less need for the trucks. The truckers are the first to know when the economy is going downhill. The overall stock market, on the other hand, has no idea and doesnt share this same reality. The analysts dont drive trucks and neither do the traders or investors.

Looking at the chart, 2007 is going to be bad, but not for the truckers. Loading up on the trucks in January. . .
 
P.S.- The float is smaller (21 million shares) on ABFS and 3 million shares shorted, 500k volume a day. It appears there is a lot of naked shorting going on too. If history proves correct, they should be covering very soon. It also has a 1.6% dividend which makes it a little more attractive.
 
Quote from thehangingman:


This makes perfect sense because trucks transport goods. When people stop buying products there is less need for the trucks. The truckers are the first to know when the economy is going downhill. The overall stock market, on the other hand, has no idea and doesnt share this same reality. The analysts dont drive trucks and neither do the traders or investors.

Looking at the chart, 2007 is going to be bad, but not for the truckers. Loading up on the trucks in January. . .
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I do not understand. Do you say that truckers are the only people buying trucker's stock?
 
No.

When I say "truckers", I mean the truck driving companies in general.

The truckers transport goods that people buy, building material that is used for houses, gasoline for stations, etc. The less demand for all these items thus the less need for the trucks. If these items are not being transported, then the economy is probably not expanding.

So the truckers, meaning the truck driving companies, know where the economy is going at all times. Thats because they transport the most needed and essential cargo.

The DowJones Transports is a less reliable indicator because it has airlines and other transport companies that do not haul the same type of cargo as the trucking companies. An airplane cant haul lumber, gasoline, or steel. FedEx doesnt deliver large loads of any of that stuff.

Therefore, the trucking companies stock price tracks exactly with the economy at all times. During a recession or other pullback in growth, then its time to get in on the truck companies. The thinking here is that the trucking companies would have been tracking with the economy all along and will be at a bottom when the economy is at the bottom.

The overall stock market will never track with the economy for a variety of different factors. Companies like Apple and Google are overlyhyped and wont fall until the last minute. Many stocks are traded in this way, on hype and hope. Truckers are traded based upon real fundamentals. You cant hype a trucker.

I will bet anything that if more negative reports about the economy come out, then Apple will start falling fast and furiously. Where as Arkansas Best will start turning up.

Quote from dhpar:

I do not understand. Do you say that truckers are the only people buying trucker's stock?
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If I am buying value stocks I wait until unemployment is over 10 % and the unemployment offices are full. Interest rates might be greater than 15 %. Truck drivers might be getting laid off because factories are closing. The Dow Jones Industrial Average might be more than 20 % less than the historic high value. I might read in the newspapers that people are stealing electrical power wires to trade at yard sales for clothes. Engineers might pack my bags at the supermarket. The newspaper might have more than 20 pages of house foreclosures. I might have trouble sleeping because of despair and fear. I expect to hear my neighbors and friends complaining about how much money they lost investing in stocks and how it is not possible to make money investing in stocks. My neighbor's kids and babies might be living with mom and dad because they have no money to pay rent and lost their home. A real positive sign might be when people are eating their dogs and cats. Then it might be a good time to buy value stocks.
 
Quote from Hook N. Sinker:

If I am buying value stocks I wait until unemployment is over 10 % and the unemployment offices are full. Interest rates might be greater than 15 %. Truck drivers might be getting laid off because factories are closing. The Dow Jones Industrial Average might be more than 20 % less than the historic high value. I might read in the newspapers that people are stealing electrical power wires to trade at yard sales for clothes. Engineers might pack my bags at the supermarket. The newspaper might have more than 20 pages of house foreclosures. I might have trouble sleeping because of despair and fear. I expect to hear my neighbors and friends complaining about how much money they lost investing in stocks and how it is not possible to make money investing in stocks. My neighbor's kids and babies might be living with mom and dad because they have no money to pay rent and lost their home. A real positive sign might be when people are eating their dogs and cats. Then it might be a good time to buy value stocks.
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LOL - of course if you have enough cats left to pay for your stocks....
 
thanks for explanation <i>thehangingman</i>.
I still feel better with long AAPL / short QQQQ strategy. But Yellow Road looks really attractive...:eek:
 
This is the master chart. Rates are bouncing off the bottom line. So a rough look at this chart tells me that the 10 year may be at 5.5 by May if the channel stays intact.

A look at the Gold chart tells me that there is an uptrend that started in October and a new upwards channel forming. This is smart money getting into Gold because they know what lies ahead.

If the ten year chart is correct, then somewhere in the first 2 quarters of 2007 there will be mass liquidation causing a nice little panic and then everyone will flee to Gold.

The reasons I believe why there is merger mania right now is because the ten year is still very low and its not expected to remain that low for long. Someone out there sees what I see in these charts and they are buying gold and doing mergers before the big one comes.
 

Attachments

Well I do not really use Fundamentals in my trading arsenal nor do I invest for the long term. But, I do have couple problems with your analysis.

The oil prices are still high. Thus, the price of gasoline is high as well. Now, I am no trucker, nor do I live anywhere close to the highways system. AKA NJ turnpike. But, don't you think it cost a lot of money to fill up one of those bad boys up. I mean how much can an 18-wheeler go to the gallon. I am no expert, but it can not be more than 10 miles.

Then the truckers have to pass the prices of gasoline to their consumers. So, they jack up the prices.

If, I am the consumer. Meaning a company that needs to transfer the goods. I do not like to see high expenses going toward transporting a product. So, I have three options.

1. Make the price higher.
2. Eat the cost. Thus, lowering your revenue and profit.

OR

3. Go cheaper root. Well thats where railroads come in. If I am able to pay less for shipping something via railroad. Better believe I will do it. (Although you still need trucks, to transfer the goods from railroad to the stores.)

Now, please tell me why will I use trucking services against those of railroad?
 
The transportation index is the heart of technical analysis. Technical analysis is partly based upon the theories of Charles Dow. In the Dow Theory, there are 3 parts and when the transports start diverging then you know your in the third part.

While you wont use this in intraday trading, its part of the big picture that must be understood. In the late 90s, many traders did not realize or know they were in the third part and ultimately not prepared for what was about to happen. The result was huge losses for unprepared traders. There were many funds that lost billions of dollars. From 1997 to 2000, their confidence was built up and fundamentals were shrugged off. There was an uncountable number of big investors during that time who I had seen on CNBC who admitted to millions of dollars in losses.

Since most traders consider these fundamentals as "noise", then the surprise comes when the trends start to change. When the trends change, the traders dont realize whats going on or why its happening. They feel confident that their old models will work just like they did last year. Then this is what we call Amaranth.

This might disappoint some people here on what I am about to say and it might hurt someone's feelings, but we need to face reality...here goes...

Jim Cramer lied to you guys. He did a few segments a while back on trucks and trains. His logic was that as energy prices went up then more companies would use the trains for transport. Jim didnt understand that trains dont simply pull up to small towns anymore and offload their goods to the local stores. Most cities and small towns are not based around train hubs anymore as well. The train cant simply pull up to the local Circuit City to offload the flat screens and I cant just rent a small space on one of these freight trains where as a I can rent a small space on an 18 wheeler.

When looking at a train, what do most trains ship that trucks do not ship. The answer to that question is coal. As oil and natural gas prices go up, power plants switch over to using coal. 50% of the United States electrical capacity is derived from fossil fuels. When oil/nat gas prices soar then they switch over to coal.

Its important to note the requirements of each of these power plants. One power plant takes 20 minutes to go through one traincar load of coal. This means that one power plant will use 72 train cars of coal in one day, 26208 train cars of coal in one year. About 80 "unit trains", which consist of 100 cars, leave Wyoming every day. Each unit train is over a mile long and can power 1 power plant for a little more then 1 day. The amount of coal to power the United States in 1 year requires a trainload of coal that is roughly the circumference of the entire Earth at its widest point.

Steel manufacturers also use coal to make coke and they are right now churning out as much steel as possible.

Now there are several other commodities that are transported by train as well where its not appropriate to be shipped by truck. Lumber and steel is more appropriate shipped on a train then a truck. Huge amounts of grain, etc.

Here is a sum-up. Higher commodity and energy prices is a result of demand in the marketplace. More demand means more train utilization. Certain commodities can only be shipped on trains like coal.

Consumer goods are more likely to be shipped by truck. The trains might play a role in this, but ultimately the trucks will be used to offload the trains. The trucks will then travel to a hub, etc.

If the train companies guide up, then you look for a surge in the commodity&energy market. If the truckers guide up, then you look for a surge in the retail sectors.

The truckers will tell you when its time to sell stocks like Circuit City. The train people will tell you how to play the futures market. These are the people that know there is demand before the market knows it and they will know when the demand has fallen when the market doesnt know it.

The next question is what happens when the power plants start switching back to gas. The answer to that is in the companies that control the pipes. . .

Quote from rateesquad:

Well I do not really use Fundamentals in my trading arsenal nor do I invest for the long term. But, I do have couple problems with your analysis.

The oil prices are still high. Thus, the price of gasoline is high as well. Now, I am no trucker, nor do I live anywhere close to the highways system. AKA NJ turnpike. But, don't you think it cost a lot of money to fill up one of those bad boys up. I mean how much can an 18-wheeler go to the gallon. I am no expert, but it can not be more than 10 miles.

Then the truckers have to pass the prices of gasoline to their consumers. So, they jack up the prices.

If, I am the consumer. Meaning a company that needs to transfer the goods. I do not like to see high expenses going toward transporting a product. So, I have three options.

1. Make the price higher.
2. Eat the cost. Thus, lowering your revenue and profit.

OR

3. Go cheaper root. Well thats where railroads come in. If I am able to pay less for shipping something via railroad. Better believe I will do it. (Although you still need trucks, to transfer the goods from railroad to the stores.)

Now, please tell me why will I use trucking services against those of railroad?
More...
 
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